Delay, delay

Posted by: Paul Donovan

25 Feb 2019
  • US President Trump is to delay the 1 March increase in trade taxes on US consumers who dare to buy goods partially made in China. Equities responded positively in Asia (trade taxes being an effective equity tax). The US S&P is not quite back to the level when the trade taxes were first implemented; of course the events of the last six months have changed risk premiums.
  • UK Prime Minister May is to delay the vote on exiting the EU to 12 March. Parliament will still vote this Wednesday on delaying the exit if the government's deal is not agreed. Some EU leaders are suggesting a delayed exit should target 2021 – economists despair at the thought of another two years of talking about this. The economy would do better with certainty.
  • China does seem to be placing more emphasis on growth stabilization. This was a focus at the Politburo "study session", and was also implied in the PBoC monetary report. A credit surge seems unlikely, but the tone of policy has shifted.
  • The calendar is quiet. We hear from BoE Governor Carney, who can say little new given the EU divorce uncertainty. Spanish producer price inflation is unlikely to excite markets.

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